21 April 2016

Inventions Breed More Inventions - Just Another Reason for Optimism

Invention begets new invention. Patents are steadily going up and even the rate of patents seems to be steadily going up.

Here's a graph of data from the US Patent Office.

As you can see, patent numbers have almost shifted to a new plateau in this decade. Although it has dropped off a bit in the last couple of years, I don't think that it will level off.

When talking about something like economic progress and innovation, the comparison with last year is less important than the comparison with last decade. Within this data set, there are four years - 2012 through 2015 - that can be compared with the previous decade. That is impressive for two reasons. One, this decade is significantly higher than last. Two, the rate at which it is getting higher is getting higher.

2012 2013 2014 2015
39.2% 52.0% 71.6% 88.9%

In 2012, there were 39% more patents than in 2002. In 2013, there were 52% more than in 2003. In 2014, there were 72% more patents than there were in 2004. And last year, there were nearly 90% more (almost double) the number of patents that there were in 2005.

One reason I think that this rate of innovation will continue to accelerate is that innovation is a function of interaction. You see a carriage behind a horse and you see a combustion engine with a certain amount of horse power and you get the idea to combine the carriage and the engine into a horseless carriage. You see a mouth piece and a telegraph cable and you get an idea of sending voices down wires, turning the telegraph infrastructure into a telephone system. 

As we innovate more, there is a bigger foundation for further innovation. Benjamin Franklin once said, "Money makes money and the money money makes makes money too." This remains one of the more whimsically accurate descriptions of compound interest. Your $100 makes $5 by year end. Next year, that $5 also makes money. The money your money makes also makes money.

Innovations work in a similar way. Once you invent a carriage and invent an engine, you have the possibility of innovations that combine those. Once you invent a car and a smart phone, innovations like Uber are possible. And as the number of inventions in the world go up, the number of inventions that can be added to the world goes up. The rate at which inventions are getting higher will get higher as there are more inventions in the world.

And as impressive as US growth is, the rate of growth in foreign patents is even better. This exchange of ideas and innovations across the planet is becoming even more pronounced. 

Here you can see that foreign patents in 2015 are more than double what they were in 2005.
2012 2013 2014 2015
64.4% 77.8% 95.0% 127.6%

As the developed world comes online and education levels rise, there is plenty of reason to think that this rate of innovation will continue to rise. The first car might have been invented in one place but cars are now everywhere. Good innovations spread, which means that as more parts of the world are innovating, more cool products will be everywhere. If you want a reason for optimism, this is as solid as any. 

No comments: